Network Solutions Jumps After Investigation Ends

NYTimes.com/TheStreet.com, 4:50 p.m. etwork Solutions said Tuesday that the U.S. Department of Justice had ended an investigation into whether the company's domain name registry violated antitrust statutes.

The Herndon, Va.-based company, which has disclosed the investigation in its financial statements, last week received a two-sentence-long letter from the Justice Department indicating the conclusion of the investigation, said a company spokesman, Brian O'Shaughnessy.

Shares of Network Solutions closed up 32 7/16, or 15 percent, to 249 5/16 Tuesday, marking the fourth stock run the company has enjoyed in fewer than three months for its handling of the same regulatory concerns.

The investigation questioned whether the company unlawfully dominated the domain name registrar business through its control of the registry where names are logged, according to published reports and to the company's brief description of the investigation in a news release.

The company, which has filed to make a secondary public offering of its stock, is in a so-called quiet period, a voluntary abstention from discussing its business to avoid later accusations of falsely hyping the stock.

Gina Talamona, spokeswoman for the Justice Department's Antitrust Division, confirmed that the agency had concluded its investigation into the domain name business but declined to comment on whether an investigation into Network Solutions in particular had taken place or ended.

People close to the investigation said the department's official comment "could be semantics" and that the company's statements about the matter should be closely evaluated.

Though the government would not typically disclose such an investigation in the first place, O'Shaughnessy said the company made an announcement about the letter because the investigation had been in the news since The Washington Post reported it last spring.

Though the announcement has helped the stock Tuesday, "in the long term, we were confident all along that our position would be vindicated," O'Schaughnessy said.

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The company's recent acquiescences to regulatory concerns made the announcement a formality, said David M. Scharf, analyst for Banc of America Montgomery.

"We never had put much credence into this as representing any regulatory overhang," said Scharf, who rates the stock a buy. His firm has not done underwriting for Network Solutions.

On Nov. 4, the company acknowledged a Sept. 28 agreement with the Commerce Department and the Internet Corporation for Assigned Names and Numbers, a regulatory body known by the acronym ICANN and formed to set policy for the domain name business.

In particular, the Department wanted the company to separate its registrar businesses, which processes domain name applications, from its registry, which logs them.

The announcement that Network Solutions would recognize ICANN's existence and comply with the Department's directive to allow competition drove an immediate 8 percent increase in the company's stock price.

All of the purported regulatory developments since then have been largely meaningless, Scharf said. Indeed, the stock price has lost its initial gains after each of them.

Before trading opened on Dec. 22, the company said it retained financial advisers to consider splitting the registrar and registry businesses. By the end of the day, the stock price had gained 4 13/16, or 2 percent, to 272 1/4. But it fell to close at 250 1/4 the next day.

And on Jan. 18, the Supreme Court rejected a challenge to the company's fees for use of the registry, driving the stock price up more than 500 percent in one day. While the issue of whether the company's fees are exorbitant is arguably slightly different from the issue of whether the company should be allowed to control the registry, investors quickly changed their minds, erasing the bulk of the gains the next day.

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A version of this article appears in print on February 2, 2000 of the National edition with the headline: Network Solutions Jumps After Investigation Ends. Order Reprints|Today's Paper|Subscribe